Fewer sea-changers hurt performance of regional coastal property markets: RP Data's Cameron Kusher

Fewer sea-changers hurt performance of regional coastal property markets: RP Data's Cameron Kusher
Fewer sea-changers hurt performance of regional coastal property markets: RP Data's Cameron Kusher

The Australian population is highly centralised with 64.1% of all residents living within a capital city. In fact, 55.6% of Australians live within the four largest capital cities: Sydney (20.5%), Melbourne (18.3%), Brisbane (9.2%) and Perth (7.7%).

Despite a preference for capital city living there are many key regional areas across the country that are home to a significant population. This week we look at the recent performance of the 10 largest regional markets.

Although most Australians call a capital city home, the 10 largest regional housing markets account for 16.2% of the national population and every one of these regions has a greater population than that of Hobart (216,656) and Darwin (128,073).

In fact, the Hunter, Gold Coast, Illawarra and Sunshine Coast regions are respectively the 6th, 7th, 8th and 10th most populous regions of the country. It is also no surprise that all of the most populous regional areas of the country adjoin the coastline and all except for the south-west region in Western Australia are located on the country’s eastern seaboard.

Given that all of these regions are coastal, many have experienced relatively weaker housing market conditions over recent years. There are two main reasons for these conditions: firstly, the downturn in the tourism sector brought on by the higher Australian dollar and the global financial crisis (GFC) and, secondly, the slowdown of migration to these areas, known as ‘sea-change’, which was so prevalent in many of these areas before the GFC.

Click to enlarge

Source: RP Data

Across these regional markets, detached house values have recorded quite a varied performance over the past year. Half of the regions have recorded value falls with the other half recording an increase, the performances have varied from a -5.2% decline in values across the far north region of Queensland (which includes areas such as Cairns, Atherton and Cassowary Coast) to a 7.4% increase in values within the mid-north coast region of New South Wales (which includes major centres such as Coffs Harbor and Port Macquarie).

The five-year average annual change in house and unit values highlights the ongoing weakness in many of these coastal markets since the GFC. Although most regions have still recorded growth over the past five years, only the mid-north coast (6.8%pa) and Barwon (7.4%pa) have recorded average annual growth in excess of 5% pa over the period.

 


 

The weakness is further highlighted by the fact that each region has recorded a decline in house values since the market peak. Queensland regions have typically recorded the largest declines, with values down -12.4% from their peak on the Gold Coast and -11.4% in the far north region.

Regional housing markets are largely dominated by detached houses as opposed to units. As a result, mid-north coast and Wide Bay-Burnett do not have enough unit sales to calculate reliable statistics. Nevertheless, the remaining regions have all seen unit values fall over the past year with the south-west region of WA (which extends from Mandurah south to Manjimup) the one exception, recording a large 12.1% increase in unit values.

The growth (or decline) in unit values over the past five years across these markets has been greater than those for detached houses, highlighting particular weakness in this market. This is due to different factors across certain markets but can broadly be attributed to the downturn in demand for holiday apartments, downturn in the tourism sector of the economy and overbuilding of units in some areas.

The weakness in regional unit markets is further highlighted by the decline in unit values since the market peak. Across each region except for south-west WA the decline in unit values since the market peak has been greater than the decline in detached house values. In particular, there have been large declines in unit values in the Far North of Queensland (-20.3%), New South Wales’ Illawarra (-19.7%) and Gold Coast regions (-16.4%) since the respective market peaks.

Overall, the major regional markets have largely underperformed their respective capital city housing markets over recent years. With the tourism sector remaining weak, some excess supply in select regions still needing to be absorbed and no sign of a return of the "sea-changers", these markets are broadly expected to continue to underperform over the coming year.

In stating this, values remain below their peak (significantly so in certain regions) and there are some attractive purchasing opportunities when you consider how far values have fallen and for how long they have underperformed in certain regions. Anyone looking to purchase must keep in mind that capital gains over the coming years are likely to be well below those experienced before the GFC and any recovery in values back to their previous peaks is likely to be a slow and gradual process over several years.

Cameron Kusher is senior research analyst at RP Data.

This article originally appeared on SmartCompany.

Cameron Kusher

Cameron Kusher

Cameron Kusher is senior research analyst at CoreLogic RP Data.

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